Family budgets set to rise again as production costs climb at fastest pace for more than 20 years

Last updated at 16:15 12 May 2008

Soaring food prices have sent household bills rocketing

Factory gate prices surged at their fastest pace since records began more than 20 years ago during April, official figures showed today.

Soaring petrol costs, Budget tax hikes on alcohol and tobacco as well as rising steel scrap prices pushed up output prices 1.4 per cent between March and April, according to the Office for National Statistics (ONS).

This is the highest monthly increase since records began in 1986 - likely to fuel inflation concerns among Bank of England policymakers and jolt hopes of interest rate cuts.

The price hikes lifted the annual rate of increase to 7.5 per cent in the 12 months to April - also a record - as surging food product costs added to the pressure.

Most economists expect rates to fall to 4.75 per cent next month, but the gloomy figures add to fears that the Bank's hands will be tied by its inflation-watching mandate.

Howard Archer, chief UK economist with Global Insight, said: "This raises serious questions as to whether the Bank will be willing to cut interest rates as soon as June despite current signs that the economic downturn may be deepening and widening."

Meanwhile, millions of families are

having to spend almost £1,000

a year extra on food after

more punishing price rises.

The annual increase in the price of a

basket of essentials surged to 19.1 per

cent in May, according to the Daily

Mail Cost of Living Index.

The rate has jumped alarmingly from 15.5

per cent in April – a 3.6 per cent rise – and

there is no sign of the pressure easing.

And Factory gate prices surged at their fastest pace since records began more than 20 years ago during April, official figures showed today.

Soaring petrol costs, Budget tax hikes on alcohol and tobacco as well as rising steel scrap prices pushed up output prices 1.4 per cent between March and April, according to the Office for National Statistics (ONS).

This is the highest monthly increase since records began in 1986 - likely to fuel inflation concerns among Bank of England policymakers and jolt hopes of interest rate cuts.

The price hikes lifted the annual rate of increase to 7.5 per cent in the 12 months to April - also a record - as surging food product costs added to the pressure.

Most economists expect rates to fall to 4.75 per cent next month, but the gloomy figures add to fears that the Bank's hands will be tied by its inflation-watching mandate.

Howard Archer, chief UK economist with Global Insight, said: "This raises serious questions as to whether the Bank will be willing to cut interest rates as soon as June despite current signs that the economic downturn may be deepening and widening."